Glencore Plc. (LSE:GLEN) has reached agreement to acquire Rio Tinto’s (LON:RIO) 82 percent interest in the Hail Creek coal mine and adjacent coal resources, as well as its 71.2 percent interest in the Valeria coal resource in central Queensland for a total cash consideration of US$1.7 billion.
As quoted in the press release:
The remaining 18 percent of Hail Creek is currently owned by Nippon Steel Australia Pty Ltd (8 percent), Marubeni Coal Pty Ltd (6.67 percent) and Sumisho Coal Development Pty Ltd (3.33 percent). Each Joint Venture partner has the right to sell its share to Glencore through a “tag-along” right with respect to this transaction, which could result in additional consideration of up to US$340 million.
The Hail Creek mine is located 120 kilometres south-west of Mackay and in 2017 produced about 9.4 million tonnes of coal for export from the Dalrymple Bay Coal Terminal.
In the 2017 financial year Rio Tinto’s attributable share of Hail Creek was EBITDA of US$408 million (US$497, million on a 100 percent basis) with a pre-tax profit of US$357 million (US$435 million, on a 100 percent basis) and, including the Valeria resource, gross assets of US$859 million (US$1,013 million, on a 100 percent basis) at 31 December 2017.
Hail Creek is a large-scale, long-life and low-cost mine producing two-thirds premium quality hard coking coal and one-third thermal coal for export.
As at 31 December 2017, Hail Creek had JORC resources of 794 million tonnes with proven and probable reserves of 142 million tonnes.
The Valeria thermal coal deposit is located 265 kilometres west of Rockhampton and 67 kilometres south-east of our Clermont managed coal operation. It has JORC resources of 762 million tonnes.
The acquisition is subject to regulatory approvals and is expected to complete in H2 2018.
Glencore is already a significant contributor to the Queensland economy, employing more than 7,300 people across mining and minerals processing operations in coal, copper and zinc.
In 2017 Glencore operations contributed over A$4.2 billion to the State economy in wages, goods and services, taxes and royalties, continued investment and community partnerships.
Our Australian coal business managed the production of more than 87 million tonnes of saleable coal last year from our 17 operational mines in Queensland and New South Wales.